Disclosed herein is a method for restructuring existing debt obligations on over-leveraged assets such as real property, whereby an existing obligation or mortgage is restructured or replaced by two-tier financing in which the first tier is a conventional first mortgage in an amount supported by current conservative lending standards. This first tier conventional first mortgage is referred to herein as the "Market Value Mortgage" or "MVM".
The second tier financing, which may take the form of a second mortgage or a portion of the first mortgage, is supplemented by separate debt, herein referred to as an assessment, imposed by the corporation on all of the asset's owners or shareholders ("shareholders") on the basis of their individual pro rata ownership portions of the asset. As used herein, the term "second mortgage" is intended to denote another or additional mortgage, and is not intended to refer to a mortgage that is secondary to another such that the rights of the mortgagee are inferior or subject to the rights of a mortgagee of another mortgage instrument. The second mortgage and assessment may be amortized over the same term of the first tier loan with the amortization paid by each shareholder on a fixed periodic basis. This second tier, excess or over-leveraged portion is referred to herein as a "Re-Equitizing Super-Secured Mortgage" or "RSM". The most important features of the RSM is that the assessment which supplements the RSM has separate recourse by the corporation to the individual shareholders, making the instrument more valuable to a lender on a risk/reward basis and it is due on sale of a shareholder's interest in the asset upon which it is a lien.
In addition to the implementation of the RSM, the method involves the servicing and collection of both the MVM and RSM assessment components. As each shareholder is obligated to pay on a pro rata basis their RSM assessment which covers debt service on the RSM, such amounts or RSM payment are paid to an escrow account. As such, it is then necessary to both monitor the RSM collections and payments on the RSM, as well as to periodically calculate the interest and balance due after each RSM payment date for each individual shareholder. Additionally, due to the requirement that shareholders pay on sale of their ownership interest in the property, ("units"), the remaining balance of the pro rata RSM mortgage assessment, calculations of amounts due on sale to satisfy unpaid balances on the mortgage reduction assessment must also be preformed periodically. Moreover, once the mortgage modification is in place, shareholders who are attempting to sell their units will be able to inform potential buyers of the carrying costs for the units that will be in effect for new shareholders less the debt service, principal and interest of the RSM. As such, calculations for the new maintenance to be charged a new owner must also be periodically performed.